Grain marketer amassing farmers' field predictions

July 24, 2007|By Bill Hord, Omaha World-Herald, Neb. Writer

LINCOLN, Neb. - Every week for nearly a year, Dawson, Neb., farmer David Auxier has logged on to his computer to predict the future. He answers such questions as: What will the average corn yields be in Richardson County in southeast Nebraska? How many acres of soybeans will be harvested? How many bushels? How about the state average yield? The opinion of Auxier and other farmers is so valuable to Bunge, a global grain marketing company, that it offers prizes to those who regularly forecast how things on the farm will turn out. "I play every week," said Auxier, who accumulates points that he hopes to someday cash in for a vacation in Cancun, Mexico, or for a farm utility vehicle. With its new agriculture game called Farmetrics, Bunge became the first grain commodity firm to use a prediction market to help make its marketing decisions. Winners are those whose forecasts come closest to the U.S. Department of Agriculture's actual data, which is reported months later. Prediction markets reward people, usually with money, for making accurate forecasts. Some of the markets require that participants pay money, much like a wager or a stock purchase, to back up their predictions. Bunge uses points that can be converted into prizes listed in a catalog. "We couldn't use money, because that comes too close to gambling," said Bill Towles, coordinator of Farmetrics. "We're not into that." Towles said several thousand farmers nationwide are now registered to participate in Farmetrics. Since the University of Iowa in 1988 first persuaded people to buy contracts on political candidates to predict election results, the idea of rewarding the best forecasters for sharing their knowledge has taken off. "The idea of a prediction market is that there are people in the general public who have valuable information," said Thomas Gruca, a marketing professor at the University of Iowa and a board member of Iowa Electronic Markets. "The question is how do you find out that information." One way is to conduct surveys, but that involves time and effort to contact people and get their responses. "Organizations are looking for an easier way to get the information from a lot of people quickly," Gruca said. "If this works for stocks, why not do it for things that are happening in the future?"